Finances a mess - don't know where to start.

[WonderOnTheUp]

Hi, firstly I'm sorry in advance as there will be much moaning in this post!

My dh and I own our current home (with hefty mortgage) which we bought when we both had decent salaries.

Fast forward 5 years and after several redundancies for dh and job changes for me, our annual income is half what it was. The redundancies have meant that we owe money which totals £17k in credit card/loan plus another £3k to other people.

We are lucky to have about £80k equity in this property and wanted to remortgage to pay off the debts and increase the term of mortgage by 10 years to make relamrnts manageable.

In theory this would work for us but unfortunately I have a default on a credit card dating back 5 years (no longer have credit card) which makes getting a mortgage impossible. Without me on the mortgage we wouldn't be able to get enough to remortgage at all, let alone take out equity. Dh salary is currently variable and we are living from payday to payday (just).

My credit rating was very good (just over 900) a few months ago but is now 680 and rated poor. I haven't missed payments but the credit report shows lots of searches from insurance companies on my report - would that effect it? I don't know how it has gone so bad. Most of the debt is in DH name with £3k in mine.

I want to sell up and move to a cheaper house but our dd is settled and happy in school. We could find something cheaper in catchment area if we are patient but worry about paying bills in the meantime and moving costs as we don't have any savings.

Has anyone been in a similar situation or can anyone advise what we should do?

Get rid of the car. It's nuts to be driving around in such an expensive car when you are so much in debt.
I have no debt and we have three years salary in savings.
My car ( which I bought three years ago) cost me £800.
If you sell your car you can pay off a chunk of your debt, buy a runaround and be £200 a month better off.

Is your DH still self-employed? Spending your tax money is either a sign of real desperation or piss poor financial management and it sounds as if he would be better off as a PAYE employee so that his income is more secure and more regular? If he is still contracting, and it sounds like he is from your original post where you say his income is variable, he really needs to get a grip of the company's finances, or let someone else do it. Could he make more if he worked away from home and lived very frugally?

I think the car needs to go - you've got a sunk cost fallacy about how much you've already spent on it. You can't afford that balloon payment so cut your losses and move on.

I think you're probably right that selling the house and moving somewhere cheaper is the right thing to do, but the lodger idea is worth exploring certainly in the interim.

I would echo the use of YNAB, it's particularly good for people with variable incomes and I use it as my business software as well. (I'm also a contractor).

I would head over to Money Saving Expert or The Motley Fool's Dealing With Debt board, do a full statement of affairs and let the people on those boards really give it a once over. Consolidating more debt on your property is a short term fix creating a long term problem. What are you going to do next time you've run up debt you can't pay, dump more into the mortgage? I would try to address the root cause if you can.

Have you switched the credit cards to 0% interest as there are lots of companies about who offer it? Post a listing on gumtree to advertise your spare room.
For us...we ended up renting out our house and moving to a much smaller place, the rent pays our mortgage and a little extra. (our other house is on interest only rate).
Is your mortgage interest only as that is another way to save a lot of money.